Yesterday, the D.C. Circuit stayed the EPA’s new rules for methane emissions from oil and gas production in response to a petition filed by a group of environmental NGOs.  The group of petitioners, which includes  the Environmental Defense Fund and Sierra Club, claims that methane emissions from the oil and gas industry are “significant by any metric” and thus that EPA’s failure to regulate such emissions is arbitrary and capricious.  The rules, adopted on Aug. 13, effectively roll back Obama-era regulations regulating methane emissions from oil and gas sources.  EPA’s stated justification for the rulemaking sets a precedent that would allow the agency to regulate emissions from a given source category only if those emissions significantly contribute to air pollution, a high threshold to meet.  In practice, this approach would preclude any future regulatory attempts to reduce greenhouse gas emissions, and by extension, to address climate change.

The new rule rests on two lines of reasoning that would increase hurdles for regulation of greenhouse gases. First, EPA appears to believe that a finding that a given pollutant contributes significantly to climate change is an insufficient basis upon which to regulate that pollutant wherever it is emitted. Rather, EPA’s position is that it must find that emissions of that pollutant from each industry that emits it are a significant contributor. Second, under this rule’s reasoning, significance for climate change purposes would be measured on a global scale, rather than the national scale used previously.

EPA found that a 2016 rule issued by the Obama administration was invalid in part because the agency never made an endangerment finding with respect to emissions of methane from the transportation and storage of oil and gas activity, and thus was not authorized to regulate in that context.  Under the Clean Air Act, an endangerment finding (referred to in this rulemaking as a significant contribution finding, or SCF) is the conclusion by EPA that a given pollutant emitted by a given source category “causes, or significantly contributes to” air pollution.  Such a finding authorizes EPA to regulate that pollutant under section 111 of the law.  EPA’s approach in requiring a pollutant-specific endangerment finding to regulate from a given source category represents a departure from long-standing agency practice.

The Wall Street Journal reported that EPA may intend to use this newly-articulated policy to block additional greenhouse gas standards.  By raising the bar for what constitutes significant, EPA could justify choosing not to impose restrictions on previously unregulated air pollutants from any given source category because they do not significantly contribute to pollution (and by extension to climate change) on a global scale.  In addition, EPA can make it easier to make no significant contribution findings by carving source categories into smaller and smaller pieces (for example, by separating oil and gas transportation and storage from production and processing, as the agency did here).  While the rollback does not state what constitutes “significant” in this context, the agency intends to issue a separate rule defining “significant.”

EPA made an endangerment finding with respect to greenhouse gases in 2009 in the wake of the Supreme Court case Massachusetts v. EPA, in which the Court held that the Clean Air Act requires EPA to regulate carbon dioxide emissions from motor vehicles if EPA finds that they endanger public health or welfare.  In that case, the Supreme Court held that “reducing automobile emissions was hardly a tentative step” towards addressing air pollution.  “Judged by any standard,” the Court held, “U.S. motor-vehicle emissions make a meaningful contribution to greenhouse gas concentrations and hence, according to petitioners, to global warming.” By contrast, the Journal reported that according to one senior EPA official, the agency’s current climate modeling “shows that limiting emissions from almost any U.S. industrial sector won’t change global temperatures from what is expected in 2050, even measuring out to the sixth decimal place,” because of emissions from other sectors and foreign sources. Using this framework, “no source would pass the test for new regulation,” according to the EPA official.  

This approach may work. It would be difficult for a court hearing a challenge to the current rulemaking to find that methane emissions from the oil and gas sector make a significant impact on air pollution where EPA has demonstrated (albeit with questionable metrics) that the opposite is true.  Under Supreme Court precedent (Chevron v. NRDC), since the Clean Air Act does not define the word “significant,” EPA may define “significant” however it likes, as long as its interpretation of that term as used in the Clean Air Act is reasonable.

However, it is unclear whether requiring a regulation to make a measurable impact on forecasted global temperatures by 2050 is a reasonable interpretation of the phrase “causes, or significantly contributes to, air pollution” under the Clean Air Act. In fact, in discussing the significance of the plaintiffs’ climate change-related injuries, the Supreme Court in Massachusetts stated that it was not “dispositive that developing countries such as China and India are poised to increase greenhouse gas emissions substantially over the next century: A reduction in domestic emissions would slow the pace of global emissions increases, no matter what happens elsewhere.”  EPA, the Court held, must regulate greenhouse gases even if doing so would not have a “significant” impact on rising temperatures.  “The risk of catastrophic harm” from climate change, the Court noted, “though remote, is nevertheless real.”

The extent to which this rulemaking will actually change methane emissions will depend on several factors, not the least of which is the degree of success of the environmental groups’ petition.  Legislative recourse may be forthcoming as well; House Democrats proposed a bill in August that would penalize large-scale methane leaks.  In addition, ExxonMobil, Shell, and BP have publicly spoken out against this rulemaking and are actively undertaking efforts to abate their own methane emissions. (Note that all three are members of the American Petroleum Institute, which supports the rule. Any stated disapproval of this rule by the oil majors should thus be taken with a grain of salt.)  Finally, the administration may not have time before the end of its first term to finalize its rulemaking on the definition of “significant,” which would make the rollback less potent.

EPA’s stated justification for this rulemaking also sets a dangerous precedent. By requiring an endangerment finding prior to regulation of each individual pollutant from each individual source category, this rule would ensure a lengthy, resource-intensive rulemaking process for any new regulations under any future administration that subscribes to this justification. This approach would also have consequences beyond greenhouse gases, as it would require this process for all rules promulgated under the Clean Air Act.  And under a different administration, this precedent could provide fodder for industry challenges to future rulemakings that are not based upon a source-specific endangerment finding.The current administration appears to have learned its lesson from some recent legal setbacks that revealed its lack of diligence in early deregulatory efforts, including court decisions with respect to permitting of construction on the Keystone XL pipeline and the Department of Interior’s recent attempt to roll back methane regulations for oil and gas activity on federal lands.  This 200-page rulemaking evidences an effort by this administration to provide reasoned justifications for its actions to ensure their efficacy.  It also appears to leave a trail of breadcrumbs upon which industry could challenge a new administration’s rules in the event the Trump administration does not stay in place. For example, a future administration’s attempt to regulate a pollutant for the first time could be challenged on the grounds that an endangerment finding had not been made for that pollutant.